FastMatch: Broadening its Horizons

In 2016 Fastmatch saw year-on-year average daily volumes (ADV) on its platform grow by 54%, and no doubt this growth was at least partially responsible for Euronext’s decision to spend $153 million to purchase 90% of the platform in August 2017, as it subsequently registered a 44% increase in ADV for that year.

2018 saw strong, if not as spectacular, year-on-year ADV growth of 9% to $20.1 billion, but Kevin Wolf, CEO of FastMatch and head of FICC US at Euronext, instead highlights the increase in the number of clients using the platform as the key growth metric for the year.

“When we think about client acquisitions, we break it down along two dimensions: one is the number of clients and the other is the diversity of clients,” he explains.

Thus far, FastMatch’s growth has been driven by what Wolf refers to as the professional trading community – essentially banks, brokers and proprietary trading firms – but that increasingly the aim is to bring more buy side firms onboard, with the initial targets within this segment being hedge funds and then the real money community.

“As we’ve matured, we’ve looked to round out our ecosystem and last year was actually a very successful year on that front. But the reality is that new clients, especially when you’re moving into the buy side, tend to take a while to ramp up, so we haven’t felt the full impact of the client acquisitions that we’ve made just yet,” says Wolf.

Another area of growth for FastMatch in 2018 that he highlights is in the firm’s sponsored access model, whereby buy side firms come onto the platform via bank algo desks. Because of the lack of prime brokerage relationships amongst the real money community, currently the only real avenue for them to use a platform like FastMatch is through the sponsored access model, explains Wolf, adding that in 2019 encouraging more firms to use this model will be a big focus for the firm.

In terms of expanding the universe of participants trading on FastMatch, he also emphasises the impact of Euronext’s ownership of the platform, arguing that being part of a large, stable organisation with a large balance sheet influences perceptions in the market more broadly.

“When you’re growing up amongst the professional trading community, maybe this isn’t as important. But as you start to move further out into the buy side to engage firms that historically don’t know the platform, having the Euronext name behind you makes a really big difference,” says Wolf.

This difference is not merely superficial, it extends to the crossselling effort that is currently underway with the Euronext clients across Europe, he adds. Another area of focus for FastMatch last year that is set to continue throughout this year is building out the FX Tape. Launched at the back end of 2017, the daily notional volume of flow on the FX Tape was hovering in and around the $100 billion mark at the end of 2018, although it looks to have dropped off significantly in January to be registering closer to $65 billion per day.

Wolf claims that it was always projected that the tape would only start gaining commercial interest once it was hitting $100 billion, and says that events such as the yen flash crash that occurred at the beginning of January could prove to be a catalyst for generating increased interest in the tape.

“We got numerous calls from people asking us what the tape looked like from 5.30pm to 7pm [EST] on January 2 because they wanted to try and reverse engineer what happened and understand what was in there. The tape itself actually spiked that day and a good quant that was ingesting that data in real-time probably could have seen something coming with that data,” says Wolf.

Indeed, he reveals that the tape is used internally to compare what is happening on the FastMatch platform to the rest of the market, describing it as “our first level sanity check” when the FX market gets volatile.

Beyond market data, other areas where FastMatch will continue try and differentiate itself from the other ECNs in the market is in the technology that it offers, such as custom algo and order type development for clients or the ability to manage internalisation on the client side, in addition to the analytics and the liquidity management tools that it provides.

“Liquidity management is still a battleground for platforms and the market has been evolving how it thinks about execution over the past few years. It’s not the venue’s job to tell anyone how to think about execution, it’s our job to facilitate the dialogue and provide the information we have in ways that are useful for clients. Or said differently, it’s an area where we can compete by having really good, useful, well-crafted analytics and very experienced FX professionals who understand them and can discuss with clients what those analytics say and what they could do with that information,” says Wolf.